Insights: Market risks from A to V

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August 21st, 2021

Although Afghanistan represents less than 0.1% of global GDP, its military collapse represents a significant amount of lost political capital for the Biden Administration. How this political defeat plays out in the months ahead remains to be seen.

We know in the months following the fall of Saigon in April 1975, gold dropped as investors breathed a sigh of relief that the war was over. However, the associated loss of political capital in the Ford administration was followed by years of bad policy outcomes as inflation rose and unemployment remained elevated. Within the five years following the surrender of South Vietnam, gold rose by more than 600% at one point in the winter of 1980.

Gold initially dropped after the fall of Saigon (click for larger)

We are not suggesting that gold will be hitting $10,000 within five years or even that inflation will keep rising. However, we do believe that the events of the last week will change the policy-making dynamics in Washington and other major capitals significantly. Given the growing dependence of the US economy on government support, the risks associated with policy errors are large. The chances of another debt ceiling crisis come to mind, and the Gold/Silver ratio may be sniffing this risk out. The US equity market is not, at least so far.

Risks appear to be rising as gold outperforms silver

The rising ratio has yet to benefit precious metals shares. On Monday, our morning report identified a contrarian play (EQX) in our morning report, driven by Ross Beaty who was buying big and earns the honour of being our Insider of the Week. On Tuesday, we thought we had the makings of new upward momentum in the group via Wallbridge Mining (WM). Unfortunately, that has turned out to be a false signal as we explained when we posted the August 21st Top Movers Report.

Interestingly, even as the US dollar strengthened this week, bitcoin and other cryptocurrencies strengthened. That theme showed up on the INK platform on Monday, when we were surprised to hear bitcoin bear Jared Dillian change his view. On Wednesday, we highlighted how crypto-equity stock Cypherpunk Holdings (HODL) had made it into our August Top 40 Report (Headwinds of summer). Meanwhile, as we noted in our #innovation-crypto_blockchain channel, cryptocurrency Solana (SOL) hit a new all-time high last week, reaching $81.25. In July, it was trading below $25.00, and given its recent run, SOL is likely due for a pause. In a timely interview on Thursday, Solana founder Anthony Yakovenko provided us with the network's background and his vision for the future. It is a comprehensive interview that provides an outstanding introduction to the opportunities and challenges facing Solana. If you would like a less technical overview of the project, watch the latest Coin Bureau Solana review from May 1st. INK's community token has been built on Solana, and we will have more to say on that in the weeks ahead.

The disruptive use cases of Solana

Cryptocurrencies made further headway in Canada over the past week as VersaBank (VB) reported that it had begun testing its VCAD stablecoin on the Stellar blockchain with plans to execute similar transactions on the Algorand blockchain in the near future. In an email on Friday, VersaBank CEO David Taylor indicated that they have chosen to work on Stellar and Algorand due to Ethereum’s hefty transactional fees along with Stellar and Algorand's quick transaction confirmation times. However, they would look to support Ethereum as speed and cost issues get worked out. Canadian DeFi appears to be getting closer to liftoff.

Finally, we remain cautiously upbeat towards the Canadian oil patch as we explained in our Friday morning report video summary, which is also our video of the week.


Top 3 Gainers Last Week

Company NameStock Symbol1 Week Return %
Airboss of AmericaBOS8.3
CanaccordCF5.0
CascadesCAS2.4

Top 3 Losers Last Week

Company NameStock Symbol1 Week Return %
Doman Building MaterialsDBM-21.0
AutoCanadaACQ-17.8
Hudbay MineralsHBM-17.2

Returns are as of the last trading day of the previous week.

Featured Clip

Insider of the Week

Equinox Gold Chairman Ross Beaty

From August 6th to 10th, eight Equinox Gold (EQX) insiders bought a total of 282,688 common shares at an average price of $7.82. The buying was led by Chairman Ross Beaty who spent $2 million buying shares in the public market. That has us wondering if Equinox shares have finally hit rock bottom.

INK Canadian Insider Index

1 Year Total Return Performance


Historical Performance

Annualized Total Return as of August 20, 2021 04:49 pm
1 Year 45.90%
3 Years 9.16%
5 Years 8.79%
10 Years 10.02%


To learn more about the Index please visit
https://index.inkresearch.com

5 Year Total Return Performance


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